A debt blow-out overshadows an otherwise bullish trading statement at temporary recruiter and welfare-to-work scheme operator Staffline (STAF:AIM).
Staffline, which is aiming to deliver £1 billion in annual sales and £50 million of pre-tax profit in 2017, says full year results for 2015 will be in line with expectations.
Cash flow will be weak because of a record number of contract wins in Staffline’s OnSite temporary recruitment unit.
Temporary recruitment is a cash intensive business because agencies like Staffline pay worker wages up front and do not get paid by their clients until later.
As a result, contract wins often result in one-off cash outflows.
‘The record performance in winning new business in the Staffing Division has led to a short-term increase to working capital requirements, which, in conjunction with the acquisitions completed, means that net debt peaked at the year end at around £64m,’ says the company in its trading update.
Net debt, defined as debt minus cash, increased £46 million to £64 million in the 12 months ending 31 December 2015.
Acquisition spend totalled £29.5 million in the first six months of the year and Staffline made two more small acquisitions in the second half.
Net debt is expected to decline rapidly in coming periods, management says. Existing debt facilities total £85 million, according to Staffline’s half-year report dated 22 July 2015.
Underlying earnings per share is forecast by joint house broker Berenberg at 93p a share in 2015 and 112p in 2016.
Staffline trades 1% lower at £13.90, valuing the business at £385 million. The FTSE All-Share is down 1.7%.